good morning. today's top stories, a key debt auction in italy amid post-election uncertainty. in the u.s. quarterly report due from retailers like target, dollar tree, and tjx. plus, ben bernanke goes back to capitol hill. yesterday the markets rallied on what the fed chairman had to say with support of easy monetary policy. it's wednesday, february 27, 2013. we have one day or two days left in the month. "squawk box" begins right now. you called me a dove. maybe in some respects i am. but on the other hand, my inflation record is the best of any federal reserve chairman in the post-war period or at least one of the best. about 2% average inflation. so we have worked on both sides of the mandate. and we're trying to achieve a stronger economy for everybody. good morning, everyone,

welcome to "squawk box" on this next to the last day of february. it is not a leap year this year. you know that, joe. friday is march 1. i'm becky quick along with joe kerner and andrew ross sorkin. we've been watching the u.s. equity futures. after triple-digit gains for the market yesterday, you see a little bit of a pullback this morning. dow futures down by 15 points. s&p futures off by 2.5 points. and the dow recovering more than half of monday's losses with yesterday's big gains. it was about 115-point gain yesterday for the dow. today we're assembling a group of some of the most season's veterans on wall street, offering guidance on where to best position investments from here. among our guests, jim o'shaughnessy, chief quit strategist bob doll, s&p's alec young, and former new york fed staffer dino kos. a big part of the market rally store is housing. and some signs of recovering. real estate firm trulius will join us with the latest numbers. then we'll have breaking economic numbers.

we've got january durable good that's are set to hit the tape at 8:30 eastern time. economists looking for a drop of 5.3%. before we get to that, andrew has this morning's top corporate headlines. good morning, andrew. >> hey, becky. yep, the big headline this morning the faa saying it is not close to approving test flights of boeing dreamliner 787 with a battery fix. now the government agency is now denying news reports that such tests could start as early as next week. remember, last week we were talking about some of those news reports themselves. in other news on boeing, the company's engineering union decided to drop its demands that its labor contract include a pension for new workers. the move could speed up a deal as the two sides resume bargaining today. and shares of airbus parent eads gaining an -- gaining in early european trading. the company predicting higher profit this year on the heels of expected 2012 earnings and cutting costs. apple holding its annual shareholder meeting in california today. investors will now not be voting on a proposal from the company

to eliminate what's called the blank check preferred stock. you might know what blank check preferred stock is in this context because shareholder david einhorn had launched the legal action against apple. and a judge blocked the investor -- blocking the proposal. also in the news, best buy founder richard schulzy's effort to take the company private is reportedly in trouble. happy to say that we've been saying that the whole time. reuters says his attempt to secure financing has faltered and an alternative strategy to line up minority investors may not happen. so there you have it, joe. >> andrew? >> yes, sir? >> how are you? good to see you. >> good to see you. in other corporate news, clearwire reportedly plans to tap financing from sprint nextel. the "wall street journal" says that the move further complicates dish's efforts to buy clearwire. dish, you might recall, made an offer of $3.30 ashire for the wireless -- a share for the wireless broadband operator. thought we had this settled. clearwire had already agreed to sell itself to majority owner

sprint for 297 then did 330. special committee on the clearwire board reviewing the dish offer. this is that favor thing, right? >> yep. >> yeah. then you think we put this to bed? >> you think we put best buy to bed? >> we weren't talking about the difference between 2.97 and 3.30. not -- somebody needs a -- >> you have $10 million in stock, you don't care. >> i guess, but i don't. i don't care. the pentagon chief for the f-35 warplane is slamming his partner lockheed martin. he's accusing them of trying to squeeze every nickel out of the u.s. government faults them for seeing the long-term benefits of the project. and tesla ceo eland musk vowing to pay back an energy deficit loan in half the time required by the government. the company receives a doe loan

in 2010 and made the first payment of nearly $13 million in december. >> by the way, did you see yesterday -- remember we had -- there was a big debate about the test drive of the tesla in "the new york times." >> yeah. uh-huh. >> and phil lebeau -- >> went well. then edmonds did one yesterday. >> how did that go? >> not so well. the whole interior screen that sort of is the hub of the whole car, it stopped working. >> i don't understand this debate anyway. if you want to go a long trip like that, wouldn't you take a different car? rent a car or -- >> yeah. phil made the point. this is what you do -- >> andrew made the point, too. >> if you feel green and you want to, you know -- >> you want to tool around town -- >> close to where you work, the car you get in at night. but. >> drive around at -- a $50,000 car for that? >> if you're going to take a trip like that, you don't want to be in a situation where you're stuck for hours recharging. take a different car. >> this will work itself out in ten years. >> right. >> the batteries won't work.

>> you won't have to have the same -- >> i can't get over this cannibal story. people don't have it -- >> another cannibal story? >> barbie doll. cannibal's barbecue plan. barbecue plan for beauty. you know, you said we've got a bunch of seasoned veterans on the show. i was thinking, which one -- nothing will take the horse meat. >> in a rare interviewer with seasoned -- interview with seasoned veterans. >> nothing will take the horse meat story off the front page quicker than -- >> the -- >> swedish meatballs, 5-1 at pimlico. those don't seem as weird. i mean -- >> no. >> who wants to cook up their girlfriend? >> there are weird people out there. we were talking about this this morning. if you watch local news, there are awful, terrible, weird stories. >> then i happened to notice -- >> did you see the headline -- >> did you see the apartment on top? isn't that the one -- >> that's high place. my place. >> search andrew ross sorkin,

new york apartment, you will be able to find -- >> all right, all right, all right. all right. >> i'm going to put your address on line -- >> start tweeting it. >> did you see this? >> his high school picture? >> i want to eat you. next -- next to the pope. the whole thing -- >> the pope thing -- >> weirder and weirder. another business story is odd, too. new jersey governor chris christie signed a bill legalizing internet gambling. new jersey becomes the third state in the nation to offer online betting. this bill means that online playing of any game offered by atlantic city's 12 casinos is out there. so bets can't be placed until the state division of gaming enforcement actually sets a start date. casinos say that it could take stockton 12 months to get ready. with all the stories you heard about atlantic city, they could probably use an advantage, some sort of help to get people back in their dorms. we go -- back in their doors. from gambling to beer. class-action lawsuits accusing anheuser-busch of watering down its brands. the suits claim that consumers

have been cheated out of the alcohol con stated on levels. this is only 3-2 -- >> some have supposed to have 5%, some are supposed to have 4%. apparently there's some ex-employees who have come forward. >> right. >> suggest that -- >> whistle blowers say they know they were intentionally watering stuff down which is crazy. the beer lovers in the suit are seeking millions in damages for all the alcohol that they missed out on. the lawsuits are based on information again, as andrew said, from former employee at the company's 13 u.s. breweries. anheuser-busch calls the claims groundless and said its beers fully comply with labeling laws. which is interesting. it doesn't say like they said we never watered anything down. >> how do you measure the value of -- of -- less of a hangover? >> and all -- bloomberg probablied like this. people get less strong -- one thing you don't want is to try to get, you know, to get a buzz on all that liquid. that's beer -- i've stopped. if you drink three beers, like

36 -- then the second six pack which goes down pretty smooth, as well. what are -- 144. you're going to be basically i'll set my -- my alarm -- >> every hour. >> every ten minutes. yeah. >> by the way, talking about soda bans in new york. if you order pizza -- >> you can't get the -- >> get the big -- >> it's true. call it soda jerks. >> you tried yesterday? >> no, over the weekend. we ordered -- you can't order a big bottle. >> that's crazy. there's four of you at home. >> in this case, we had eight people. we thought we needed soda. >> you're fat -- >> thank you. thank you very much. >> let them eat cake. >> we drank water. >> i'm not happy with that. all right. why don't we talk about the markets? let's look again. we showed you that the futures are indicated slightly lower. but many people are saying volatility is back. you saw big, big moves this week. dow down by over 200 points on monday. gained back 115 points

yesterday. see where oil is trading, up 22 cents, 92.85 is the low ever level we've seen in 2013. crude oil settled back below $93 yesterday. if you were watching the ten-year note, bernanke's testimony yesterday was a big decider in which direction the note was going to move. right now the yields at 1.862%. he's going to be speaking again today. you can bet that the market is going to be watching closely. the dollar is down against the euro at 130.91. down against the yen and pound, as well. gold prices popped back to a two-week high yesterday during bernanke's testimony. this morning, it's down $7.90. still above $1,600 at $1,607. >> i think w made the -- he made it cool to use. >> it's legit, i can say it? >> say it -- >> decider. as i knew that word, i knew you would give me -- >> you knew i would. he is the decider. he makes the decisions.

decider. people mis-- underestimated him. not anymore. time for the global markets report. >> i love -- >> stand by -- >> it's not kelly evans today. >> it's not? >> it is james bond himself, ross westgate. mr. westgate? >> mr. sorkin, good morning to you. we are -- you see, weighted slightly to the downside. we tried to have a bounce going first thing here. in europe, it's petered out slightly despite a relatively well received italian debt auction. more from me and michelle, of course, in rome in a few minutes. about 5-4, decliners outpacing advancers on the dow jones stocks 600. this is where we stand. same for the ftse, up 12. cac coran up 14 points. .4%. flat on the dakotas dakotas. the ftse mib in italy, it was down just before the italian auction. it's rebounded up 29 points. they raised the maximum target $6.5 billion. the key thing, i won't say any more because i don't want to steal michelle's thunder, the yield was less than many had

anticipated on the ten year. 4.83%. less than what was priced in the secondary market, which suggests pretty good demand for italian paper. the impact on spain fairly muted. you see actually the ten year back up under 4.9%. ten-year spanish yield, 5.3. they have been higher during the session today. i do want to point out, gilt yields. so we've got stripped of the aaa by moody's on friday. since that point, gilt yields have fallen. now that may be nothing do, of course, with what's going on in the u.k. more about general risk appetite post the italian elections. yields now 1.937%. we dipped below 2% for the first time in a month toward the end of the session yesterday. we have continued to see those yield fall. so yes, we've lost the aaa, but like we've seen elsewhere with countries that have lost their aaa, it hasn't stopped it in a risk phase, still getting safe haven flow. george osborne will be happy with those gilt yields, 1.435%. we're seeing spreads widen out

between the peripheral and the core in europe, as well. let's share -- remind you where we stand on the currency markets. something just to show you on that face. ear/dlar 134.95. the low yesterday, 113.17. we are still pinned down. no real movement yet or any sign of what may happen with the gridlock or result of that gridlocked italian election. on which note, i'll hand it back to you. >> all right. we'll -- we'll go south, southeast of where you are. for more on the situation in italy. did you see my mind working? that was -- oh, now i feel like -- >> the pope? >> i'm blessing you. yeah. including the key data auction -- we're going to rome. that's again where we find -- why don't you stay over there? >> you coo k do tha-- you can d if i did it, it wouldn't go over

well. >> michelle, why don't you stay? that starts soon, doesn't it? >> reporter: i'm very tempted. i could do the pope, there's -- i could find many, many stories to do in italy, joe. if you take me every morning from italy, i would do it. >> where are you now? i'm trying to -- are you -- you're not near the steps, are you? >> reporter: no. we're at the ministry of the interior. >> okay. this is where they were counting the ballots. we have chosen this location because, you know as the story comes off the front burner, moves to the back burner, we want to save the company money. we've gone to a slightly cheaper location and set up, et cetera . i hope the bosses are listening. there's stuff to tell you about. ross highlighted the italian auction. the -- you know, months went by where we didn't pay attention to what italy had to pay every month when it went to borrow money. remember, it has to borrow a lot of money. we're back to doing exactly that.

let's show what happened this morning. they borrowed in total 6.5 billion euros of money. they did five years and ten years. the five years, they sold 2.5 billion worth at 3.59%. compare that to last month, 2.94%. so definitely higher. but not as bad as some people had expected. when it comes to ten year, very long duration paper, they sold four billion worth at 4.83%. consider last month that was 4.17%. if you look at the one-week chart of the ten-year yield for italy, you have seen their interest rates rising. now, if they had done this auction on monday, might have been a lot uglier. so clearly things have calmed down. every time you see italian interest rates rise, remember, they have to roll over 300 billion euros worth of debt this year. that sucks -- when your interest rates rise, it sucks cash flow out from other places of the government where you would have spent it otherwise. that's why this is problematic. now the political update. there is talk potentially of a

loose coalition being formed between the following two gentlemen that we are going to show you. the first one is the center left leader, luigi personi. and perhaps him teaming up with the anti-establishment comedian, bepe grillo who we'll show you. here they are. >> translator: it's as clear that anyone who cannot guarantee the ability to govern his own country cannot be said to have won the elections. and therefore, we haven't won even if we were first. this is the substance. and this is also the reason for our disappointment. >> translator: they talk about coalitions. they're finished. the story is finished. another story will start. why do you continue talking about coalitions? they're finished. >> reporter: so clearly bepe grillo, the guy you saw, says he's not interested in the

coalition at all. there has been talk that everybody would go into parliament. and his party would help support only the laws that they want to support as opposed to the old style of doing things where once you get a coalition in theory, everybody agrees we're going to push certain things forward altogether regardless. so that would mean, you know, things that we know he supports, he definitely wants smaller government. he wants fewer members of parliament. he doesn't want taxpayer to fund any more campaigns. he also wants free internet for everybody. free tablets for all children. he's against high-speed rail. he would support a referendum on participation in the euro. it's a real hodgepodge of mixes as opposed to luigi bersoni, old school communityist, leftist. you can -- communist, leftist. you can imagine what his platform would be like. all happening march 15. back to you. >> thanks, michelle. seriously, though, when does the stuff start with the conclave? when is -- that's coming up, isn't it? i mean, i want to save us some

money. >> reporter: yeah. it's coming up. well, yeah -- the 28th he does the -- what's the official word? not resignation, abdication. he steps down. they've moved it up, right? i haven't paid as much attention to the pope maybe as i should have because i've been trying to understand italian politics. >> i wonder if we stay there -- >> his final audience is today. the vatican very busy again today. >> i wonder as a business network whether we stay there. probably not to the extent that we did with this. maybe we don't need -- i don't want to mess this up for you. maybe -- as long as you're there, i was thinking you should stay for that. this again, what markets would we quote after the story? it doesn't really -- >> well, except for that you never know what will happen with the next term with the italian parliament. you know, michelle made the point that it stepped off the front page for today. on monday it was ruling the roost and could come back at any point. >> someone needs to be there for the return of the lira. >> well, that's true. >> right. exactly. >> true. >> one way to think about it.

>> if we get a new pope and he is infallible, i'd like to know whether we end higher or lower if the year. if we would -- we could see that -- >> not available on everything. only when he says he's speaking with infallibility. you know that. >> we'll get him to speak -- >> can you tell us with infallibility where the market's headed -- >> compared to guys we talk to -- by the time we're finished with two hours with them, all i know is the market will continue trading. >> coming up -- >> yeah. seasoned -- seasoned veterans. >> michelle, thank you. we'll check in with you later, too. when we come back, the results of the latest nbc news/"wall street journal" poll. findings on why americans call the sequester a bad idea. first, a programming note for you. an annual show back by popular fan demand. "ask warren." on monday we will report live from omaha with warren buffett. he is ready to field your questions. send them to us via e-mail at askwarren@cnbc.com. or you can tweet with the #askwarren.

♪ [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. this is the pursuit of perfection.

welcome back to "squawk." dow futures this hour off 12 points. nasdaq off about five. the s&p 500 off about two. making headlines this morning, variety is dropping its daily print edition and replacing it with a weekly publication starting next months. now the trade paper had covered hollywood for more than a century.

the publication is going to be having a management -- new math structure featuring three editors in chief. it will remove the pay wall that was puts up on its web site three years ago. "variety" was purchased last year for only $25 million. you would have thought, "variety," great brand. right? penske media own the popular hollywood web site deadline. nikki fink -- >> recovers as you go into the oscar season. some covers if you want to buy an ad on the cover -- >> valuable. >> really expensive. i don't know how you do it on line. does it translate to the same value? >> i imagine it does not, but i don't know. the issue is that nikki fink with deadline.com has become the de facto place for all of the news. >> he does a thing during the oscars where she says -- she says, i'm isn't that correcting the oscars. then she -- it's a -- >> there's advertising in the magazine. >> there is advertising. >> nobody pays for it -- >> on occasion. >> how do you make money?

>> it's worth more than $25 million -- >> "variety" used to make a muj amount of money for two reasons. the agents, payola -- >> yeah. >> yeah. paid to buy the -- paid to buy the magazine. then on the flip side, advertisers, all the studios, paid these huge fees -- >> i was -- >> they wanted to sell oscar voters on their films. that's how -- >> literally. literally. that's why i was wondering. 25 sounds like not much to you for the brand. but to me, it sounds like -- i wouldn't pay that for that thing. it's on the way out, isn't it? >> now it's on the way out. true. let's get to the national weather forecast from a very busy individual who in addition to giving us the weather is also i think the executive producer of the "today" show. most of nbc news, isn't he? alec wallace -- >> wow. >> i guess that would be a different alex wallace, and yes she is. >> i wish. >> if you need -- you know, all right. never mind. it's different. thanks. you just do the weather then,

how about that? >> yes. let's do that. and you know, today we're still tracking snow. you see here on the radar around he. stretching from the midwest through the great lakes and even into the northeast, finding snow. mainly, though, for us staying away from 95. so west of 95 is where we'll be dealing with the bulk of our snow issues for today. so here it is for our day. we're going to be watching the snow pile up for us. not huge amounts, but a couple of inch possible for places like detroit, then we'll see a little bit more to continue across sections of new england. even as we get into tomorrow, still dealing with some rain, though, right again across the coastal areas. let's check how much we'll find. this goes through friday morning. additional one to three inches. most of us will be on that lower end of that scale. working back toward the north and the east, though, more. michigan, three to five. same for us here as we work into southwestern portions of new york state. even a few pockets as we get into northern new york state and new england where we may be talking about a foot of snow in some locations. and then in the wake of all of

that, we've got cold air coming in for the eastern half of the country. for the end of the week. by tomorrow, temperatures for us in the central plains, 10, 15 degrees below average. we keep that going into friday. chilly numbers here for us. 44 for you at oklahoma city. look at memphis, 43. that's a good 16 degrees below average. even the sunshine state last weekend, we were well up interest the 80s. that will not be -- well up into the 80s. that will not be the case. saturday's high in tampa, only 63. guys? >> okay. thank you for that. we'll talk about a new nbc poll this morning. "wall street journal" poll, as well, it's out. ahead of the sequester looming at the end of this week. chief washington correspondent john harwood joins us with some of the headlines. a pretty something poll, john. >> it is, andrew. and what we see is the american people are not happy with any of the players in this. and they're not happy with the sequester cuts. when we asked do you want the -- do you think the sequester cuts are a good idea, 52% of the people say no, they're not.

just 21% say they're a good idea. when you look at who's behaving better or behaving worse, we ask who's bringing the country together, who's taking a partisan approach. president obama does okay on that score. he's 48% of the country say he's trying to bring the country together. 43% say he's taking a partisan approach. but republicans get hammered by the public. only 22% credit republicans with trying to bring the country together. three times that many just about, 64%, say they're driving the country apart -- in a partisan way. and when you look at the issues at stake, each side has some advantages. but -- from the democratic point of view, looking out for the middle class, 22% advantage for the democrats. on the issue of taxes which is traditionally a republican strength, democrats have a small advantage plus 3%. republicans on the flip side, who would do better at protecting a strong defense?

26% advantage for republicans. who'd do better at reducing the deficit? 6% advantage for republicans. so each side brings strengths to this issue. but president obama clearly has the high ground in terms of the bully pulpit and trying to put pressure on republicans. he hasn't been able to put enough pressure to avoid the sequester. that's where we are where we are. >> john, there's what they call the call-out in the paper. they say 1/5 of respondents think sequester is a good idea but twice as many favor deep cuts in federal spending. there seems to be a disconnect with what's happening. >> there is. if you look at the numbers, they don't like the sequester cuts. and that's not surprising. first of all, the word sequester sounds bad. people don't know what it means. and everybody like you and me and -- and everybody throughout the media has been saying it's a bad idea. so it's not too surprising that they would say that. when you say what do you replace it with, when you add together the people who would like it keep it and people who want deeper cuts, it's a majority. it's 53%.

clearly the strength, the hold card for republicans in this debate is the idea of cutting federal spending in general. that is a very popular idea. the challenge is when you put it to specific programs, those -- the specific programs tend to be popular. that's the rub. >> that's -- i don't know if you say anything it a 22% number. you know, that's almost like you can ask a -- go out it a vegetable patch and get 22% almost, john. you know, that's -- that's barely -- you can't draw any conclusions from that. and the one thing that you just finally said which i think comes really late in the report, there's -- if you say replace, get rid of the sequester and replace it with even deeper cuts, you get a plurality. if you add the people that want the sequester and the ones that want deeper cuts, you actually get a majority. and that's where i think, you know, that if -- that if the democrats get too sure that the -- the public wants bigger government, those are the numbers they need to look at. if they think that you can, you

know, pigeon hole the republicans and win the house back in a couple of years just based on starting fights with sequester, they might have to consider those numbers. those are telling numbers, john. >> well, no, they are significant. that's why i mention them. at the very end. >> well. right. yeah. okay. >> the very last thing you're going to mention is that maryland/duke game. probably at the very, very, very end. >> the one we won or the one we lost? >> when was the -- what's the more recent past? you got a big game coming up, too. is that tonight or tomorrow night? >> no -- tomorrow we've got virginia. tyler's team. >> do you have miami coming up? >> that's going to be a hard game. then saturday we've got miami. who crushed us -- >> i've made plans. >> what who crushed us on their floor. we'll see whether we can take them on. >> 6:30 sudden. we can't do anything saturday night. yeah. >> john, one quick takeaway. if you topper project out a year for now, say we go after the

sequester cliff and nothing happens in the next month, who do you think ultimately gets blamed? >> look, when you're the president of the united states, if things go bad, that's going to have an effect on you. but when you narrow it down and realize that we don't have a presidential election next year, we have a congressional election, republicans are on the short side of this. their image is very bad nationally. when you ask people, groups of americans do you have a favorable image of the republican party, republicans have a net negative image with every group in the country except for white southerners. they -- they're very much behind the eight ball. but that doesn't mean that democrats would win the house. as joe indicated, you've got a republican majority. and -- the democratic minority most of those people are in safe districts. >> local, all politics are local, too. >> right. so the number of competitive districts may not be enough to flip control in the house even

if republicans do get blamed. one postscript on the support for spending cuts that joe and i were talking about a moment ago. one thing we didn't ask in this poll but typically draws 2/3 support is the idea of raising taxes on people t top. so that -- people at the top. so that we simply don't have numbers on that in this poll. but consistently over time when you say should -- should you raise taxes on people near the top, you get like 2/3 support. >> it only affects -- raising the taxes on somebody else. it affects -- >> that's right. >> but john, i was thinking about -- number one, if the sequester goes through and, you know, the world doesn't end, we've got -- we've got our national security, if i understand, we'll be more prone to a terrorist attack or something. less safe because of 3%. we've had business people, we've had business people come in and out. and, you know, that are in a position. they said if i had an edict, a

mandate, to try and get 3% of my expenses out of my business, i could do it with my eyes closed in one hour. not one customer or client or employee would even know. there's so much things you can do around the edges just with pure waste. when you ask the question do you want a hammer cut where you don't have any discrimination of -- of course they're going to say we don't want that. we want some way of doing it that's smarter. the way you ask -- >> the -- >> they don't want to slice the baloney. she should axe individual items. >> but -- they should axe individual items. >> but you can't -- >> you could do three, that's nothing. but if you go to newport news, virginia, john, you'll find people that are going to be furloughed. trouble's going to be easy to find a -- >> yes. real people are going to be furloughed. >> that's the only way a nutrition organization can tell the story is by going and -- a news organization can tell the story is guy going. >> tonight talk to jpmorgan. >> they'll tax cut -- don't talk to jpmorgan.

>> they'll cut people. >> speaking of news organizations, you may have noticed a significant number have gotten to the end of the line, the nibbling around the edges stuff, and cutting the jobs of real people. that's what the federal government's go b to do. >> right. >> okay. we can always work at "variety," john, or -- >> deadline.com. >> deadline.com. thank you very much. really, i said -- i have plans at -- last night, upset night, john. did you see xu -- memphis had 18 straight games. >> i saw minnesota beat indiana. that was something. >> i love -- you were -- supposedly one of your hometown, indiana. >> yeah. >> and florida got beat by tennessee. the only team that looked really good was wisconsin which i think they were going to be moving up. >> charles doing his -- he was doing his brackets. >> i'm obsessed. coming up, ben bernanke heads back to capitol hill. we'll ask if the markets will get another boost from the fed chairman. heading to break, let's look at yesterday's winners & losers.

♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line,

infinite possibilities. at tyco integrated security, we consider ourselves business optihow?rs. by building custom security solutions that integrate video, access control, fire and intrusion protection. all backed up with world-class monitoring centers, thousands of qualified technicians, and a personal passion to help protect your business. when your business is optimized like that, there's no stopping you. we are tyco integrated security. and we are sharper.

[ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪

to hold over 80,000... well that would make you... the creators of the 2013 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. among top stories, this is the top one, i think. watching ben bernanke yesterday, he will head back to capitol hill today set it defend the central bank's policy. meant to comment on that sound bite of him at the top where he said, "i have the best inflation record of any fed chairman in history." >> because for now --

>> you happen to have the greatest -- the greatest depression except for the great depression, you presided -- >> what happens from your policies down the road that people -- >> he said i don't think housing's a big deal before we fell off the cliff in 2007. that was a effective inflation management strategy that he instituted in 2007 to make sure that he was -- would be the best record -- >> very proud of himself. >> he said it with a straight face. i was like, you're a -- usually i lankt-- i like the bernanke. bragging about i have the best inflation rate after we've had sub 2% growth for the last, you know, 8% -- >> on a relative basis to where we were. >> i know. but we've had no growth or growth in employment. of course we've had no inflation. we've been trying to recover from the worst financial crisis -- >> he's looking at it on the -- >> he doesn't know. only the pope can tell us whether we'll have inflation in the future. the infallible guy. >> new pope or old pope? >> either.

it depends when they pass -- >> the old pope -- >> talking now. yeah. it's bittersweet. you know what's weird is he's a couple of years older than the last pope who was definitely on his last legs when he finally passed away. all right. let's go to these guys. michael tyler, chief economist at eastern bank. he must be the guy on the left. michael? good to see you. >> good morning. good to be here. >> you're looking good. from the ceo, alan nukman. i can tell that because it says cme behind you. i'm pretty fast. let's start with you. let's see, michael. yesterday, was that not significant after last week that bernanke was so sort of -- i guess he just ruffled all the feathers about whether there was any tight new englaening any ti. >> yeah. he's got a real challenge in front of him. i think he's got three items on his agenda that he needs to take care of.

he sees the economy is fragile. he needs to not be too hawkish on cutting the deficit and reducing spending. he's got to keep short-term interest rates down so people refinancing their mortgages, who are buying business equipment, who are doing other things like that are able to continue to have easy access to money. the third, he needs to start preparing longer term as the private sector gains momentum. he needs to be able to prepare for an exit from his current policy. >> did -- so you think that he did that yesterday? i mean, is he -- has he gotten the markets to the point where we can take all those minutes and that's already in the past, that's done? >> well, i think that investors have recognized that a lot of what you saw in the minutes, for example, smfs discussion that an exit has to come sooner or later. and i think it's most likely going to come in the form of a reduction of the longer term asset purchases so you'll start seeing it first in long-term interest rates beginning to tick

up. >> if the sequester -- the sequester's going to go through. say it stays in effect for a while. do you have a different gdp number based on that? >> well, if you just do the arithmetic, $85 billion over seven months is not quite but close to 1% of gdp. so theoretically that's the effect. but a lot of it takes place overseas, especially in the military section. that has very little impact on gdp. the domestic programs that are going to get cut could be significant. it accelerates over time. i think you're going to see at this point -- i suspect that congress and the president are saying, all right, the sequester's going to happen. let's not fight it. let it happen. and then let's use the continuing resolution at the end of march to figure out what we need to tweak in order to make this acceptable to the public. >> do you think that at some near term diminishment of gdp, but seeing that we can actually start shrinking government, could that ever turn out as actually being a positive even

though near term it might not be seen as a positive? it seems right now that i mean, i see the way we run trillion-dollar deficits and can't cut 3%. i think that's even a worse sign than cutting the 3%. >> i can't disagree you. i think that longer term the government has to reduce especially in the entitlements area, it has to reduce its impact on the economy so that the private sector doesn't get squeezed out. but that's a longer term issue. doesn't have to be done abruptly. and i think when we were listening to poll results, that's what the public was saying is don't do things abankruptly. don't do things -- abruptly. don't do things arbitrarily. use intelligence. that's what we elect you for. use intelligence to figure out where, when, how much to cut. >> all right. alan, with all that in mind, what would you be doing in terms of all the markets that you follow? >> well, where t's important in a lot of markets now. if we look at copper, the euro, crude oil. crude oil at the halfway point of theeraly from $87 to $98. it's important here.

and you alluded to inflation. i was looking at the crb index. it's down 10% over the last 52 beaks. commodities in this break has not participated in this re-inflation in the equities markets. i think there's good value. b we saw gold have a nice bounce. the key is the dollar. we were talking about all the sequester, the financial difficulties in america. the dollar it s at the highest point since september k. that be supported, justified, or does the dollar need to unwind? people keep talking about how we're printing money and, you know, that has inflationary concerns down the road. but the fact is the dollar, 15% above the lows that we saw in 2008. so i think that's -- that's something that needs to be focused on because we're getting a disconnect like you alluded to. >> okay. gentlemen, thank you. michael tyler and alan knuckma. it's not tyler, michael?

it's confusing, "people" with two first names. confuse -- people with two first names. confusing at times. you don't have a son named knuckman, did yoo you, allen? >> no, but michigan/michigan state -- >> that's another i want to see. we haven't even had the conference tournaments yet. i don't know why i'm into it. the stupid brach lets last year, his success with the brackets. >> a first-time gambler. >> like a first-time gambler. i am. andrew? coming up, crude realities. a top refiner says he might have a solution for higher gasoline prices, next. plus, we're fielding your questions for warren buffett. e-mail askwarren@cnn.com or tweet us with #askwarren. then hear his answers. this is america.

we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morning. 24 hours. zero heartburn. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is,

what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

welcome back. recent discoveries of new oil fields sparking an energy boom in the united states are. refineries ready for the newfound supply? president of the national petrochemical and refiners association, charlie, what do you think? >> well, we -- we've had opportunities and now we have challenges. the opportunities are we've, you know, been able to get oil from some fields, i.e. the balkan and others, that historically have been -- we haven't been able to tap. now that we're able to tap them, we've got to find a way to get those crudes to their highest

value market. most of those would be on the east and west coast. we don't have the infrastructure in place to be able to get this kind of crude to, you know, usually by pipeline to the east or the west coast. we have -- but we are making significant investments in rail. just last year, 2012, we've increased rail shipments about 230%. an extra 250,000 some cars. >> wow. >> equivalent of 450,000 barrels of oil. >> wow. >> yeah. you know, we're pretty good going north/south as far as transportation i would say. there are a lot of folk -- the keystone pipeline gets all the print as it should. >> that's another north/south line. >> that's another north/south line but we need to get the canadian crude to the gulf coast refineries. >> that's a long-term solution. that's not something that's going to be happening overnight. >> becky, there is no -- there

is no short-term solution. there is no overnight solution. so you know, we have to understand what the market looks like. what the logistics are. the massive amount of investment that the refiners are putting into rail shipments, and, you know, we -- we need to keep developing our own resources because you all know, you know this as well as developing our own resources. you notice as i do, the last barrel in dictates the price. >> obviously, they have to put it into the rails now to get it there, is there now not a market incentive to buy into longer term solutions like the pipeline, not a conviction the ball can will be there long enough? why is there not a solution? >> all things studied right now, why the free market should be allowed to run its course in the country and allow pipeliners to figure out what the long term solution is.

you can understand they won't attempt to put billions of dollars into infrastructure when government regulation or access may be limited or prohibited. >> you need an energy plan? >> yeah, we do. we need a solid plan that says -- actually, we need a plan that focuses on reality, that says we're going to be using oil and natural gas a long time in this country, a way to get the economy going and jobs back and if the government can give us assurances rather than picking winners and losers in the market we will continue to have these challenges. >> you said 250,000 cars coming from the ball can itself? >> all over the country. >> what railroads are picking up that? all railroads equally or some particul particularly -- >> i think -- probably spread out pretty evenly.

you know the big names and where the ball can fields are. i think it's amazing, becky. can you imagine or think five, six years ago, we're in this predicament. i say predicament, it's a challenge, we have the opportunity to get these east coast refineries off brent and being able to compete in the marketplace and keep refineries running on the east coast, that's a win-win situation. >> charlie, thank you for joining us today. >> my pleasure. >> the top market strategists, and signs of a rebound yesterday. find out what areas are finding home prices popping. and durable goods eastern. [ male announcer ] this is not my home.

there. i said it. they don't have pictures of my kids. they don't have my yoga mat. and still, i feel at home. could it be the flat screen tv? the not so mini fridge? ♪ the different free dinner almost every weeknight? or maybe, it's all of the above. and all the rest. am i home? nope. but it almost feels that way. homewood suites by hilton. be at home.

[ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪ i know what you're thinking...

transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business.

coming up, s&p's alec young and the markets and much more when we return. tdd#: 1-800-345-2550 i've been doing a few things for a while that i really love--

tdd#: 1-800-345-2550 playing this and trading. tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take 'em up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud.

tdd#: 1-800-345-2550 so i can use it on the web, tdd#: 1-800-345-2550 where i trade from most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me setup my platform the way i wanted tdd#: 1-800-345-2550 from the comfort of my home tdd#: 1-800-345-2550 and we talked about ideas and strategies. tdd#: 1-800-345-2550 one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right ? tdd#: 1-800-345-2550 open a schwab account today and you can earn up to $600 cash tdd#: 1-800-345-2550 and 150 commission-free online trades. tdd#: 1-800-345-2550 call 1-866-502-5152 and a trading specialist tdd#: 1-800-345-2550 will help you get started today.

as stocks snap back, markets gaining nearly 1% after the worst one day drop in 2013. this morning's market panel is ready to show you where the markets are headed next. hopeful hopefully, these men talk day two of bernanke testimony. europe, the sequester and your money. housing on firm footing. why yesterday's data could mean pockets of strength for home buyers and we drill down what areas of the country are hot. and we have the numbers and instant market reaction and what they're saying about the state of the consumer. the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawkbox" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin.

a look at the futures, you will see some red arrows have mitigated. basically flat lining this morning. yesterday was a big day for the markets. flat lining after yesterday's drop of 200 points. a federal reserve chairman, ben bernanke goes before the house services committee for day two of his biannual testimony. yesterday, he told the senate that the federal reserves monetary policy is givining support to the economy. >> we have the tools necessary to tighten monetary policy when the time comes to do so. as i noted inflation is currently subdued and inflation expectations appear rel anchored. private forecasts are not projecting development of inflation precious. >> he acknowledged keeping rates low indefinitely and expressed confidence risks like that pose

little threat right now. >> numbers expected to be released this morning. holiday clearance helped boost same-store sales. when you have things on discount you wonder what the margins are and interesting to see what they have to say about higher prices at the pump, delay in tax ectation e expectations and refund checks. and patrick mcceever, senior equianalyst will join us and what the tech giant plans to do with its $100 billion cash load at the shareholder meeting today. apple's stock traded higher amid speculation the company might announce plans to boost shareholder value. this news just crossing the wire, weekly mortgage applications falling 3.1% even

though rates are lower. and the battery fix we've been talking about, the government agency denying reports such tests could start as early as next week. movie studio dreamworks animation reporting its first quarterly loss in six years as it wrote down $169 million of weak box office performance and "ri ""rise of the guardians"." i never heard of them and that may be the problem and they plan job cuts and shares were down 3% in aftermarket trading. proxy advisors iss and glass lewis are urging a proposal to split the chairman and chief executive roles now both held by one man. and they're urging those to cast

it against disney and it could sway those ahead of the meeting scheduled for march 6th. a controversy issue at the media and theme park have those dual roles of iger. the board added the chairman title to iger's role at the last one. >> look at that chart. go away. >> you look at 2005, say the same thing. >> i'm saying i'm with iger on this. >> had enough? >> if you're a shareholder, you're probably happy. >> complainers go away. >> do you think iss has been good? corporate governance. >> fphooey! >> how many companies have a chairman and ceo. the majority have one separate. >> they're virtually all

separate. >> have you heard of american exceptionlism? it ever entered your mind? want go to the uk, go to the uk. what about the uk makes you think we want to emulate what they're doing. give me one thing about the uk that makes you envious how things are going over there. >> food. >> food in the uk? german shepherd pie? how about their dental work? >> dental work has got an lot better. i used to live there. it really has. >> so has the food. >> stocks, they've got a lot of old stuff. the guy that was married to the cute -- kate -- what's his name. that's nice. >> downtown abbey. >> downtown abbey is produced by us. >> not anymore. >> an nbc production? >> no. just distributed here. a bbc production. >> a bbc production? >> am i wrong on that?

>> i would get that one straight if i were you. stocks ending at their best levels after a one day drop in 2013 and despite italian political gridlock and worries about the sequester, joining us allen young and bob dahl, chief strategist and portfolio mana r manager. where is it produced? >> produced by carnival films and masterpiece and first aired on itv. we have a new arrangement with the producers to produce a separate show for nbc. >> i know that. i think we have more to do. anyway, stew hoffman is with us, chief economist of financial services. i want to get to where s&p is on a full year s&p earnings number. are we up?

the capital iq, we tracked the consensus. right now, $111 for this year, drifting down because guidance has been lousy. last year, better than expected earnings. it's a 7 1/2 type number. the problem is it was 12 in october and 10 on january 2nd. the trend is moving down, stocks moving up. the valuation, while people say stocks are cheap at 13 1/2 times, if you look at the peg, not the valuation in a vacuum that matters, the growth, the peg is closer to 2. we don't think that ends the rally but slows it. we have probably seen our best burst for the year and we'll be higher at the end of the year and valuation p to growth dynamics, we can't keep rocking the way we have. >> produced by carnival, a british unit of nbcuniversal. oops.

all right. bob, how are you feeling about the overall markets? >> we had a huge gain from the fall. it's not year-to-date we have to focus on, where we came from the fall. we came a long way in a short period of time. i think we're taking a rest. market is tired. doesn't mean it's going down but we have thrown a lot of stuff at it. higher gasoline prices, payroll tax hikes, taking a rest. that's okay. we're going higher before the end of the year. >> higher before the end of the year. did you think italy would be a problem? ever heard of grillo before the end of this week? funny? funny looking. supposedly -- >> that's what they say. >> not like a gallagher with melons smashing -- supposedly a cerebral guy. >> it's about politics now. they have to find a way to make a coalition. >> do they stop with their

liberal, reforms, contagion? is europe on the front burner or not? >> probably the next few days. it will take italy a while to get back but then it will fade again. the big fancy band-aids is buying time for europe at a minimum. >> we have bernanke on our side. s stu, what about the sequester, long term is it a negative or positive? >> long term negative if you let it happen this big. >> this big? >> fairly sizable. >> 3%? >> $100 billion over 10 years$1 a trillion over 10 years. the sequester is sort of a tire with a slow leak. if the fiscal cliff was blowing a tire it would have veered off the road into recession. this is a slow leak, $85 billion, probably only $45

billion in spending cuts this year, but i suspect congress will come back and patch it before we ever see that much of a spending cut. chairman bernanke said yesterday we need long term fiscal restraint, we just don't need it quite as sever in the next year or two as the economy is trying to gain momentum. i think scaling it back is the right thing to do for the next year or two. >> seems like, stu, you definitely can't equate a dollar of spending in the private sector with a dollar of spending by the government. the idea that to cut any spending, cut back any spending, whether government or private is by definition bad for the economy, then we should just spend like drunken sailors forever with the government and then we'll be prosperous forever. it just doesn't seem to make sense, stu. >> your own survey of people across the country showed the majority of them aren't opposed to spending but don't like it

fairly indiscriminate across the board. >> you mean cutting, not opposed to cutting. >> not opposed to cutting but rather see smarter spending cuts. >> i can see that if you're talking 10, 15, 20%. it seems like for 3%, you could do -- any corporation could do 3% across the board of all its units, it could find 3% to cut. no? real fast? sn>> maybe they could. you're right. it's not a corporation, not run by a ceo and a board of direc r directors. it has different priorities. i think it can find 2 or 3% to cut. it doesn't necessarily have to do that in this calendar year. i suspect it won't. >> you're a big kick -- you're kicking the can. i never looked at you as a can kicker. your thomas more whoever said i want to be chased, i have a couple of girls waiting for me, maybe after they're gone, the

same thing. no? >> it's spending cuts. >> augustine. sorry, a lot of them. sorry, stu. >> i said, i don't think of kicking it the can, i don't think bernanke thought of it as kicking the can, more spending cuts over time, i agree, absolutely right. i just don't think they should be across the board and they should be so indiscriminate. you have to do a better job than that. >> this was supposed to be the bludgeon that would make them come up with a long term plan. if they still, more than a year and a half later, can't come up with a long term plan, some people say this is the lesser of two evils. you don't agree with that, though? >> i don't agree it's the lesser of two evils and don't think it was intended to get to this point i think the president said that and republicans have said that. >> you agree with spending rather than sequester kicking in? >> i think the sequester will and should kick in. i think they'll come back and

fix, probably rescind some of the spending cuts as they have a chance to see where it would be mo more targeted rather than across the board indiscriminate. >> that's not a bad thing as long as it's used to come up with a better plan. >> if it's used to come up with a better plan to use time where spending cuts could be allocated rather than completely across the board, 100 billion -- >> 85. >> 85 in the calendar year, 85 in the fiscal year is about $100 billion for the calendar year. >> you have the fed, bob, they do $85 billion a month. they do $85 billion a month. >> ben keeps saying, please help me, please help me. >> do you guys feel -- do it later? given all the can kicking we've had the last few years, it rings a little hollow to say this is too blunt a sequester, let's draw it back. all we've been doing on spending

cuts is drawing back. i don't think investors have any confidence or congress are willing to do spending cuts. obama seems to be allergic to any cuts. if i really believed we would get long term entitlement, cost cutting down, a lot of people on the right feel like we're not going to get cuts from this guy. >> people on the right that want this are big defense hawks, say i'll even take it in the defense if we get something somewhere elsewhere the growth of government slows a little. so much damage was done august 11 they had the deal in hand and was this close and fell apart. i don't think we healed from that. the animosity just is awful. >> speaking of that, i mentioned you are a blue shirt guy? >> i wear blue shirts. >> almost everyday and i do, too. the combo with that tie is a pleasing combo. but i ask you what thought

process went into the pink shirt. >> i said my foot marsh. >> the last shirt in the closet. >> who actually is taking responsibility for that. your valet apparently said it was the second footman, i thought you said. >> it could have been the third. >> val let or valet, i don't know. >> who is no longer working on the upper eastside or upper west side? >> we will have that conversation this afternoon. >> you fire them and they always come back somehow because you can't find good help. >> we have great help in the sorkin family. >> who didn't send out -- that seems like something that's pretty obvious, you send out the shirts when you get low, right? >> a little mistake was made. >> i have to talk to that guy. coming up next, the rise of the shadow banking system. why banks aren't lending and what one fund is doing to bridge the gap for developers. check out the futures. "squawk box" is coming back right now.

a mixed picture there.

welcome back to "squawk box" this morning. the housing market is picking up but some are concerned about bank lending. the president and ceo of kimball capital management. thank you for being here.

>> thank you for having me. >> we have all these bank ceos saying we're lending more and out there. you're saying not so much. >> it's interesting. a little bit of a fallacy. the banks are very interested in making loans liquid and easily secur secured. balance sheet loans more flexible money, construction, acquisition, repositioning of properties, the things that the mid-market developer is looking for, that's more difficult. >> that's a function of what? >> it's a function of, i think, three things. number one, basel 3 penalizes bank for commercial real estate loans and proposing increase of capital set aside 150% opposed to 100, historical. also, there's a big big consolidation in banks that has happened over the last few years. 88% of all deposits are in the

top 10% of banks. these big banks can't service mid-market customers. >> you jumped into the fold. there's arguably a shadow banking system that sort of emerged to make these type of loans? >> absolutely. >> is that actually -- it's good for you but is it actually good for the country? would we be better off if the big banks could find a way to make the loans that you're now making? >> big banks in my opinion have never been all that good at taking commercial real estate risk. i think that big banks tend to invest when times are good and pull back when they should be investing. i think a lot of shadow banks canned add discipline to the marketplace. remember, this is not federal fdic insured money, money managed and owned by the people putting it out. i think that's a good thing. >> in your view, how much of

this is cyclical and how much is secular regulatory. banks, as they get the bad loans off the books, as lending standards continue to ease, will they be back doing these things or is this a big change? >> great question. i think part of it is structural and part of it is cyclical. the part that's structural, i think the capital charge which peernllizes them going certain places to the capital stack which i think will be the purview of shadow banks for some time to come. also consolidation. unless there is a way to promulgate smaller banks, remember, regional banks were the big commercial real estate lenders. they're not doing so well and a lot of community banks are going away. unless that changes, this is a long term trend. >> one last question for you. commercial real estate, right now, in terms of -- we have seen the equity market go crazy.

>> right. >> we have a view on the bottom market, maybe we don't. your world? >> by and large, commercial real estate fundamentals will bump along, except for apartments. apartments are a home run because since the crisis, there are 5 million more households looking for apartments that were once owners. >> that is sam zell's point. >> in a good year, in a good year, the economy produces 250,000 net units. how many years does it take to get equilibrium? this is long term in multi-family. >> thank you for coming on. >> thank you. i appreciate it. coming up next, gambling and drinking, talking about gambling and drinking. new home sales in january the highest levels since -- i want to go back to the gambling and drink i

drinking and biggest increase in years and is it a sign? we'll ask a chief economist in just a bit. time now for today's aflac trivia question. which hollywood starlet was the youngest oscar winner in history? the answer when cnbc "squawk box" continues. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees.

reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business. tdd#: 1-800-345-2550 playing this and trading. tdd#: 1-800-345-2550 so i'm always looking to take 'em up a notch or two tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 now i can use their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, on the web. tdd#: 1-800-345-255 so i get their most advanced tools on any computer. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right? tdd#: 1-800-345-2550 open a schwab account and you can earn up to $600 cash tdd#: 1-800-345-2550 and 150 commission-free online trades. tdd#: 1-800-345-2550 call 1-877-908-9253. (music throughout)

why turbo? trust us. it's just better to be in front. the sonata turbo. from hyundai.

now the answer to today's aflac trivia question. which hollywood starlet was the youngest oscar winner in history? the answer, shirley temple, at 6 years old. >> welcome back, everybody. new jersey governor, chris christie has signed a bill legalizing internet gambling. it becomes the third state in the nation authorizing online b betting. the bets can't be placed until the state division of gaming enforcement sets a start date. it could take 6 to 12 months to get ready. joe. >> from online gambling to beer. class action lawsuits have accused budweiser bush and others of watering down the

cheap alcohol content and seeking millions in damages. the lawsuits are based on information from former employees that the 13 u.s. breweries, anheuser-busch calls the claims groundless. a couple bald spots there. still to come, housing showing signs of improvement. that was years ago, already losing. what does it say about the state of the economy? we will find out from a chief economist. stay tuned. ♪

♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold new styling, unsurpassed luxury and nearly 1,000 improvements. introducing the redesigned 2013 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

we have target coming out. i see a g.a.p. number of $1.37. that's probably what not what wl use. seeing all g.a.p. results on adjusted basis, the company earned $1.65 versus $1.48 well above. here's the adjusted number for 2013. $4.85 to 5.05 versus $4.82 estimate. for the first quarter they're looking at 1.10 to $1.20 versus

$1.05, all above. expectations in the stock is immediately moving higher up about 95 cents. fourth quarter sales rose 6.8% to $24.4 billion, looks like it might be a little bit shy of the 22.686. they sold their credit card stuff. can we use sales? >> 0.4% for the comps. same-store sales. >> up 0.4? >> yeah. >> i wonder what -- >> what the analysts were expecting f. >> that was for the entire quarter. that looks like -- at first plus, looks like a pretty good number for target, which is also -- you wouldn't call that low end and high end, like everyone end. they've done it where you will see like -- >> they do the high low like everybody else. you will see like a hollywood staff in target not embarrassed. >> you can do it.

>> you can do it. covers the whole range. you ever been in one? >> absolutely. >> is there one in this city? >> one down by union square, i think. >> if there's not, you're missing out. >> i've been up to one -- >> there's a one in harlem. >> i'm looking through the release. while they have comments, they don't have anything about what walmart was talking about, seen a slow start to the year or february because of delayed returns of income tax, don't say anything about the payroll tax cut or tax hike going back to normal levels after two years of cuts and don't say anything about how their consumers are struggling something people were wondering. >> is the target consumer more upscale? >> it's the high low -- >> where were you 30 seconds ago? your mind is mush. i just had a huge conversation about that. >> not huge. it was short. >> it was huge.

>> not huge. we were having a discussion on the side there. >> they get the low end -- >> he was telling me he wouldn't be embarrassed to go into target. if you're missing out -- pay attention. >> we're having a conversation over here. >> more than walmart shoppers. i think it's 20 to -- >> the payroll tax thing isn't going to bite that person so much and gas prices -- >> i do the same thing when you're talking, even worse -- >> what did you say? anyway -- >> let's not to say they won't say something on the call today. >> how's the- >> the what? >> the 0.4 comp? >> earnings were fine. revenue -- >> only 04 on comps. not terrific. >> did you say that also or is that new information? >> he's been on it for the whole show. he knew about the target results at 6:00 a.m.

>> 2.25. stock up now $2.25, a new high. what was akman's final determination and investment in target? is it still going on? >> no. it's over. nite didn't work out well. if he had stuck with -- that's way above. he'd be doing great. a lot was call options that would have expired. they decided to do j.p.c penney instead? >> that comp number, complaining abou about.4. that's down 30. up .4 is better than down 30, right? >> that's right. even at this hour. >> let's talk more about the federal reserve. steve liesman is on set with us because they're talking about the easing money policies to the senate yesterday. you know what i have to say before you start anything, i was surprised to hear how warren,

elizabeth warren was giving him such a hard time on some of these issues. you would think with him having easy money policies she might lay off. >> remember, warren, i think it's the first time she's been there for a bernanke testimony. this is a bit of grandstanding. >> theater. >> theater also. we have some of the back and forth. i'm calling him a feisty fed chairman yesterday because he is not running again. >> i thought because she's so feisty. >> i thought she was so feisty. >> how about where i have the best inflation record. >> i've never seen him do that. >> he was feisty that way. did you hear what he said to corker? >> i heard some of the exchange. >> none of what you said is accurate 0, not a little bit of what you said is in accuraaccur none of what you said is inaccurate. >> and there was back and forth on that. >> he came back later. >> i thought open hunting season on the fed and fed policy,

they're out of season in the senate right now. i think that white change today in the senate. let's play the elizabeth warren sound rather than the stuff i was going to read here. >> i make another prediction and prediction is always dangerous, the benefits of being large are going to decline over time which means some banks are going to voluntarily begin to reduce their size because they're not getting the benefit they used to get. >> i read you on this and read your predictions on this in your earlier testimony. so far it looks like they're getting $83 billion for staying big. >> that's one study, senator, you don't know whether that's an accurate number. >> they say there is an 8$83 million subsidy because they're too big to fail. >> and you saw the senator from arizona saying i agree with you completely on this and

bipartisan banks should not have an $83 billion subsidy. >> it depends how we count it. >> it's not a negative. >> you're right. it's not a negative. is the taxpayer giving a subsidy or is there a perception? >> it hurts small banks and makes them less competitive. >> if you take the deposits, is there a subsidy on the deposits? >> no. >> isn't that the biggest part? >> the biggest part of the business. >> the too big to fail expert. >> it is bad they get money that cheaply. >> doesn't bother me. >> bernanke on the other side of elizabeth warren. >> i'm on the other side of elizabeth warren and i'm on the same side. >> you're on warren's side. >> i see what she was saying. i don't think these guys should have a -- it is, by definition, they have much lower rates than they would normally have, because they're going to be

bailed out. >> are they? >> he said they could be taken apart. >> one of the guys asking the questions was the guy who wrote the liquidation procedure in the dodd-frank bill, bob corker. so bob corker -- >> he's saying his own bill doesn't work. >> his own bill doesn't work. >> bernanke was saying we're writing the rules now. it takes time. bernanke appears to have done enough to convince markets there will be no early end to the fed's open ended policy of purchasing assets and interest rates. let's play more sound. >> in the current economic environment the benefits of asset purchases and accommodation policy more genry are clear. monetary policies providing important support to the recovery while keeping inflation close to the 2% objective. >> rbs guys called this a strong signal from the chairman. >> my question to you is no one expect qe to go away tomorrow

but 6-9 months but don't you think this increasing dissidence from the feds and maybe they're not voting members and maybe the press could do a better job saying who has a vote and who doesn't rather than reporting everyone's view equally but appears they're undermine iing policy of the assets and more people are more worried it will end sooner rather than later. any thoughts on that? >> agree with that. i would say no other policy the current looking aspects of the qe infinity policy or more than any they had. they want to convince markets. that's what's new here. we will be in the game not for a given quantity of purchases but until we receive an economic target. if that works they try to pull forward a lot of stuff that happens in the future to today. >> why do you need the fed if you know this is a policy, why do we need an entire body talking about this if we know it is 6 1/2% and wait for that to

happen. >> that's not true for qe. 6 1/2 is the interest rate target and qe is the -- the other thing that's interesting to me is they have to -- the market is overstating what we're talking about here. maximum this year is a trillion. i think the minimum this year is $700 billion. are you going to sell stocks right now because the fed is not going to do $300 billion on the back end of this, going to do $700, not a trillion. you characterized it right, 6-9 months, we're good. >> i remember my guy who put this forth very eloquently, hon dsz ig. remember he's been on here. >> yes. >> the resolution authority doesn't cut it and these things have to get smaller to get rid of the advantage the big ones have based on having a lower

than market borrowing cost. >> absolutely. >> i think what bernanke kept saying, well, we levied other costs on them. >> higher capital fees, right. >> and warren kept saying i haven't seen it if it's there. not $83 billion. >> look, i think we need to do a whole segment on this. i'm happy to give you the background i have from the basel committee folks and reserve and what the actual subsidy is. >> you know what, let's do that on cnbc.com. let's do that online, someone that really wants to see that. >> that's an important issue. >> online tv. >> that's an important issue. >> tony just e-mailed in too big to fail subsidy is actually negative $16 billion. >> why? >> really? >> because they levied too much stuff on. >> we'll go through the math. still to come on this morning. >> let's do a segment on it. not on dotcom.

>> housing numbers suggesting buyers are returning to the market. we find out from the chief economi economist. first, check out shares of dollar tree -- excuse me, yemen. 1en 01 a share, revenue in line with expectations. onour long-te, not their short-term agenda. [ male announcer ] join the nearly 7 million investors who think like you do. face time and think time make a difference. at edward jones, it's how we make sense of investing.

face time and think time make a difference. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you.

that actually is kind of interesting. hi, welcome back. andrew said something sent in shows small banks actually have certain advantages in funding cost, not disadvantages. when i took elizabeth warren's $83 billion, that's not necessarily the right number, that they have an advantage. >> an advantage saying the number is negative. too big to fail is subsidizing everybody else by the tune of $16 billion. >> the reason there's smaller funding -- >> some of the funding sources don't trust fitch's ratings on bigger banks and bigger banks rely on different sources of funding instead of checking accounts, they focus on repo and deposits. >> we have to apologize to

steve. he's gone. never mind. we had encouraging data on the real estate markets. where are we on this cycle? are the fundamental drivers real or investor driven? jed is chief economist at tru trulia. is it real? >> it is real. we're seeing two different types of housing rebound right now. in places like phoenix and detroit, a lot is investor driven without market fundamentals to support it in places like seattle and denver, we're seeing strong job growth and vacancy rates and can support the big price increases in those markets. >> i was trying to figure out this piece in the "wall street journal." existing homes, they say the inventory has been picked over already. what are they saying? that would imply the inventory is down and make it seem more

dear for existing houses to get high prices rather than building new ones. >> remember, during the housing bust, we saw a huge inventory. a lot of overbuilding during the bubble and a lot of homes that stayed on the market. if anything, we've gone too far in the other direction. inventory is at the lowest level in years that helps boost prices but a challenge for buyers looking for inventory especially in california and other parts of the west where inventory is down almost 50% year-over-year. >> if there was inventory around, existing housing would be doing pretty well in terms of pricing as well, is that what you're saying? >> that's right. we're seeing strong buyer demand and sales increase despite the tight inventory and also seeing a shift in sales from foreclosures and short sales to more conventional home sales. that's an important sign that the markets' recovering. snow is it's easier to get credit for a new home than existing home? >> the credit still remains

tight. the typical credit score of borrower's getting a mortgage remains very high. we'll see whether that changes with the new mortgage rules that were designed to outlaw or at least make less common the types of loans that really hurt us during the bubble. >> are the home builders actually being involved in making it's easier to get loans? it says in the journal they're offering to pay closing costs or arranging loans for in-house mortgage operations, free credit counseling sessions and doing all kinds of stuff to sell new houses. is there an advantage based on that for being able to get a mortgage? >> we are seeing some of that from home builders for new home sales and reflects the fact the credit remains tight and you need a strong score to get a new mortgage and all happening even

though we're recovering. >> this sounds like we've always heard we're turning the corner and slow down a little. >> nor banks you're looking at a 30 year fixed mortgage rate, do you want to keep more of these on your books if the fed will change it. i can understand why the fed wouldn't want to lock you in at these rates. jed? >> that's right. we're seeing a lot of interest from bankss on the refinancing side and not home purchases because the rates are low and now that they're starting to rise we will see less refinancing but as the economy recovers more home buyers looking for home purchase mortgages. we will see that shift. >> we're adding to the population and stopped building as many houses. this is a long term thing. has it been long enough to where the inventory is more matched up with how many people want houses

now? >> inventory is still very tight. at the lowest levels in a while. we have seen more new construction than the past couple of years but new construction is bay below the long term normal level. two things will happen as prices recover. more new construction as builders jump into more markets. as prices rise, more homeowners decide to sell especially those under water until now and move back into positive equity now that prices have gone back up. >> i want to throw a devil's advocate question out there for you. i always get worried when the consensus is so bullish on any one area. how do you reconcile the weak job growth and the fact a lot of money is coming from institutional investors with the idea the housing market will continue to heal over time? don't we need better job growth? >> job growth is key for housing demand. that's why there are two different types of recoveries going on now. in some markets a lot of price

growth isn't driven by job growth, driveren by investors. the price increases we've seen in places like phoenix and detroit may not last. but in other places like san francisco, like denver, we have seen both strong job growth and strong price growth and where the recovery looks more sustainable. >> is jed a nickname or really jed jedadiah. >> i'm really a birth certificate jed. >> that's it? >> that's it. >> got a middle name? >> jed david. >> that could be like an anchor newsman name. hi, i'm jed david on "closing bell" with maria bart roiromo. >> something i would aspire to you. >> see, you actually said the guy. >> reward any careful viewer. >> when we come back, we'll focus on target. big bucks reporting a short time ago. we'll get wall street's

reaction. squau "squawk" will be right back. to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments. e-trade. less for us. more for you. that your mouth is under attack, from food particles and bacteria. try fixodent. it helps create a food seal defense for a clean mouth and kills bacteria for fresh breath. ♪ fixodent, and forget it. ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just to stay alive... but feel alive. the new c-class is no exception. it's a mercedes-benz through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business

welcome back to "squawk." target rolling out results this morning. to newsline to see what we can make of this. patrick mcceever, the managing director of mkm partners. good morning. what do we make of these numbers? they seem good on a relative basis considering what we think of walmart. maybe we shouldn't think of

walmart and target in the same sentence. >> they do have a different consumer demographic. target is more focused on innovative merchandising and walmart more focused on everyday low price and being the low price leader. >> that's like saying target is great and walmart is a dog. >> they -- there are some nua e nuances there. certainly, they're both mass merchants, no doubt about that. they have a pretty different customer demographic. the numbers are as expected, how i would characterize the fourth quarter numbers. sales are released, a 4.4% increase in same-store sales. t they had a nice pickup in january and earnings in line as well. >> look forward for us a little bit. payroll taxes, everything else going on sequester, anything to do with anything in terms of the consumer. what should we be thinking about

in terms of target? >> the call is at 10:30. they only gave earnings guidance in the press release. frankly, a little bit light where i was thinking it would be. on and adjusted basis talking about 4% growth in eps. that's a little light on a 52 week versus 53 week basis, some impact there. they had a 53 week in 2012. a little light. they don't make any comments on sales and all ears will be on february. >> thank you for this perspective. we have to go. also, alec young, i want to thank him for being with us the last hour. great talking with you and see you again soon. when we come back, more on today's testimony from fed chairman ben bernanke and dino is with us from the first coast.

and things consolidate after the loss this morning. dow futures up by 15 points and s&p 500 by one point. "squawk" will be right back. you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

[ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪

stocks bounce back. but can bulls pick up momentum ahead of friday's sequester. market master bob dahl. >> do you believe your asset purchases are causing any kind of equity bubble? >> i don't see much evidence of an equity bubble. >> now the house gets a turn. dino joining us for the next hour. >> and housing climbs to 4 1/2 year highs and plenty more in the housing market. >> the third hour of "squawk box" starts right now. welcome back to "squawk box". i'm joe kernen with becky quick

and andrew ross sorkin. and more from bob, asset manager in a few minutes. first, andrew ross sorkin has more with target. earnings higher -- maybe a little less so. >> it went down in the last three minutes. the analyst said he'd like to see comp store guidance. the street has a higher number but wasn't in the release. >> it was talked about. >> it wasn't but will be. >> target out with the fourth quarter numbers at $1.65. 17 cents higher than expected revenue slightly above expectations. weekly jobless mortgage applications falling 3.8% even though mortgage rates eased slightly. we'll be talking with david crowe the chief economist at the national association of home builders. and chief economist ben bernanke

will be heading back to the hill today. yesterday he told senators the fed is giving crucial support to an economy sit rattled with high employment and the house gets their shot at the chairman today at 10 a.m. >> thanks have changed a little bit, dow futures up by 13 points. these are not massive moves one direction or the other and after a big up day for the dow yesterday gaining 115 points. if you were watching overseas in asia, you saw she nikkei down by 1 1/4 percent and all the talks focused around italy, you can see the best performer of those three markets in the green and the cac in france up by 8.5%. markets rebounding with fed

chairman bernanke defending the fed. and joining us is head of regulatory global affairs and former new york bank executive vice president and bob dahl, chief executive strategist at investment management. we spoke with steve a little earlier what bernanke was saying. it seems to have undone a lot of what we were expecting when you heard from a lot of rebel rousers. >> remember the minutes are not the views of the committee, different views of factions of members. when the chairman goes for humphrey hawkins he's speaking with one voice for the committee as a whole. one message. you have seen this two months in a row the markets were focusing on minority views. >> non-voting. >> even if there were voters and they had reservations about it, those were the views the markets

were focused on and you had sell-offs right after the minutes were out. the message from the committee and you saw this a few weeks ago and the chairman's speech yesterday, when they're speaking on behalf of the committee, they are set, this is the policy stance and a long time before this changes. >> the question is, is the minority getting to be more vocal and is it getting to be a larger minority? >> we don't know for sure. we know how the voting is, that's public. we know a little bit about jeremy stein, one of the new governors had an interesting speech voicing concern about new yields. >> credit. >> and there are issues like that not being talked about. i don't see that minority is getting much bigger, but certainly the way bernanke was talking yesterday, they're set in their ways. i thought the most interesting part of the speech was where he talked about costs an benefits.

the benefits are clear, better housing, economy et cetera. costs, he put the word "potential." these are potential costs. he didn't say actual costs. if you talk to endowment fund managers and retirees, they will have a different answer. there is an asymmetric view about costs and benefits. >> bob, as an investor, you look at all of this? how do you weigh it? >> the fact the minority is beginning to talk we can't buy these bonds forever means the earnings surface is doing a little better there is some mechanism and we need to focus on that positive as well. durables doing better. housing autos, manufacturing pretty good. consumer spending numbers are acceptable, not great. i'm not sure it's all bad news. >> that is a much better positive scenario because you're talking long term benefits that come from this, not just the sugar high. >> we've been on a sugar high.

the sugar high continues as the chairman clearly said. it needs to transfer at some point to a self-sustained mechanism. >> did the market read the minutes incorrectly? >> yes. two weeks in a row they read them incorrectly. >> they're still saying there's an underlying truth there in that perhaps still needs to be accounted for. >> if you listen to the chairman and vice-chairman of the board was saying, they're dug in. they're not ready to concede we are getting that much improvement. they are worried more than others what's going on in the fiscal side. coming out of the crisis, we had strong government spending and strong government exports and weak consumption and housing. that's flip-flopped. they're absolutely right we are seeing numbers getting better, fiscal tightening j exports

slowing down, europe still a problem and signs of slowing in other parts of the world. we had a reversal. composition has changed. what are you left with? fourth quarter growth down to, let's say 1%. what's the first quarter look like? one handle as well. this is not an economy overall grow i growing in a healthy way even though sectors are doing better clearly. >> we're on five cylinders, not eight. >> you know what we didn't talk about at all yesterday, italy. do you care? >> there is another shoe to drop in europe. i don't know italy is the place. italy has been in slow growth no growth mode for 20 years now. this is one of the interesting things. you think of the lost decade in japan or two lost decades in japan. i saw something written yesterday that said italy has grown less over the last 20 years than japan. italy in a sense, i don't know

that's the biggest flash point in europe. bigger flash points may be in spain, smaller peripherals, where banks are in deep trouble. if there were to be a credit event, you could have a run on the banks. that would be a big problem. yes, i probably care about spain and some other countries more. >> what about you, bob? >> the forced recapitalization of banks in the u.s. in '09 when a lot of ce o's didn't want it to happen ended up being a good thing and has not yet happened in europe. we're still living on razor's edge for the banking system and to some extent sovereign. low interest rates, some global growth has bought time but not solved the problem. >> along those same lines, if you think about what's happening, the capital issue is crucial. we did recapitalize the banks but not denying the asset

problem. spain, the spanish market is down 30%, right? probably needs to go down more and the banks haven't begun to meaningfully reserve against mortgages. construction and development, yes, mortgages, no. when you have 26% unemployment and rising still, there's a lot of mpls still in the pipeline and those need to be dealt with. >> dino and bob will stay with us the rest of the hour. we have a lot to take about with them. >> a little worrisome. we need asia to pick up the slack. we can't sell to ourselves the rest of eternity can we here domestically? >> we could have a long discussion about asia. there's a lot of controversy about how china is and what is the underlying strength of china. >> housing comes back here, better but doing better on a lot of fronts but we need trading partners. >> we need consumption of

emerging markets to pick up. >> it won't be europe. >> we need asia and latin america. we need those guys to pick up. these things are all linked. if china doesn't pick up more meaningfully, there's the spillover back to brazil, spi spillover to all, spillover to commodity exporters relying on china. it is -- you know, it's interesting all of them have been revising global growth down not up. >> in italy, i feel bad for the italian people, their wealthy has not increased and losing pace with the rest of the world. it doesn't matter to me italy hasn't grown the last 20 years. it didn't need to grow. a perfect place. >> it's a good place and political dysfunction is something that's been around 60, 70 years. the pasta is still good. >> not quite as rich but looking out at the most beautif beautiful -- right, your

favorite place? feel rich. you're living rich. right. >> we'll talk about feeling rich in just a minute. in the meantime, a 25 year veteran of the fixed income market is warning a fed fuel bond market could burst this year. we won't feel rich if that happens. mark okada will join us next. signs in the housing market industry but is it sustainable, david crowe, chief economist in the national association of home builders.

with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity.

now get 200 free trades when you open an account.

welcome back to "squawk box". the futures are up and down and we'll see what happens getting closer to the opening bell. clearwire has elected to take the $80 million march draw under agreement with next tell and complicates dish network's effort to buy it.

clearwire had already agreed to sell itself to majority owner sprint for $2.97 a share and clearwire said dish said it would withdraw its proposal if clearwire drew on the funds made available by sprint. our next guest is an expert with $20 million under management. 19 or 20? we can round off. chief investment officer for highland capital management. you rang the stock exchange "closing bell" yesterday. mark joins us on the set. thanks for being here. >> thanks for having me. >> have you rang the bell before? >> the first time in 25 years. i don't know how long that will be there. >> did you practice before hand? >> they give you the whole thing, say you have to push the button at the right moment. if you push it early, you have to hold it for like a minute. you go late, the markets are

open. it's scary. a lot of power. >> you have to hold it for 24 hours. >> you miss it, you're in trouble. >> when you read the fed minutes, did you call it right two weeks ago? >> yeah. i think there's no way you get out of this early. you can't. if you're going to go down this road and balloon the balance sheet up as much as they have. qe-3 is very different than qe-1 and 2. they got rates down but spreads stayed high. mortgages weren't moving. you know this. when you get qe-3 and cross the line and you start buying mortgages and get into the capital markets you compress spreads and push it down. we see it across the board. aaas are tightening across the board all over the place. that's the goal, right, with qe-3 and why it's very different than qe-1 or 2. you can't give up, you have to keep going. >> did you watch ben bernanke

yesterday? >> a little bit. >> did you see how proud he was? >> a l he was quite proud of the inflation situation. >> he doesn't usually put himself in a position where he can look -- i thought it was a little strange. >> 25 years in business, you learn not to fight the fed, right, the markets? but washington isn't getting the joke. they're still fighting the feds. you have this payroll tax hitting right now. gasoline up, not them, per se, but certainly a lot of things, sequestration we're talking about, europe certainly isn't getting the joke, you have the comedy show in italy. you have a lot of things going on really countering what bernanke is trying to do. i can see him getting up there and being a little testy. >> qe 4, can you buy s&ps? let's do it. instead of just mortgages, let's run this baby to 20 grand on the

dow. >> remember they were buying cp. if you put money in the banks, you can buy anything the banks own. they already said they're going to cross this line. is there no qe 4. qe-3 was unlimited. >> it's infinity anyway. >> qe-3 infinity, whatever you want to call it. he's already crossed that line. >> you're concerned there's a little bit of credit bubble developing. the ultimate credit is equity. is there a bit of bubble there, too? >> it's tough to tell. one thing when you have this much intervention across so many different markets you lose confidence. we don't know where rates should be, spreads too tight. guys in the business doing triple bonds at 5%, 6%, i don't want to hear that. i just came back from a conference, you meet the companies, talk to them. their businesses are doing okay, good news, bad news, bonds trade at 1.08, 1.09, 1.10, not that

exciting. is it a bubble going on in high yield? i don't think we're there yet. certainly turning down a lot of it. we turned down three-quarters of the calendar last year. you have to be selective. >> a bubble usually means leverage as well. there's a difference between bubble and overvaluation. in high yield how do you say it? >> it's coming. we're getting to that point in the cycle more stuff comes more leverage. look at the deals coming all mma deal. the dell deal doesn't have much leverage. a big company with a round to. >> don't you think you will see a lot more deals with more debt? >> the seller really isn't there right now. the buyer is there. these guys would love to buy companies right now because the markets are open, coupons are low, costs are low. leverage is -- >> the seller is not there because -- >> they don't want to sell yet.

you have to get two sides of the story. somebody has to take the company private and they want to sell. i think to your point about whether equities are a bubble, those boards have to get to the points they want to sell. we get more volatility, that happens. >> quhep when do we have a wonb bubble? we heard others say there's a bond bubble. >> do you mean high yield? >> i think he's talking across the board. i don't want to put words in his mouth. >> the only we see are treasuries, government debt. >> there is this treasury market. there's direct intervention in the treasury market. once you do that, is high yield a bubble or are investors reacting to incentives getting what is provided? >> you're saying we're getting what we're paying for? >> we're getting the response

the policymakers want. hard to say a bubble maker in high yield. i feel very uncomfortable of risk curve and where treasury markets are. >> if the fed continues this policy and we see qe-36-9 months the market will anticipate i had of that. >> you will see qe-3 longer than that. >> but qe-3 -- >> you're right, i think the point you're making investors will try to front run the fed. >> they won't wait until the fed makes announcement. >> they won't make because you have different classes of agents, hedge funds need to front run insurers and insurers need to front run the endowments, each class needs to front run the one before. >> when do you run? >> you look at '94, that's an instructive year to run back on, when greenspan turned hawkish, started raising rates consistently. >> an ugly year. >> an ugly year except for

everything we ran the bell on yesterday, libor based, credit risk. that's there. often times you're raising rates because markets are getting better. you're not doing it because you have stagflation, hopefully not. but certainly we're in this period you have to look at '94, equities down, high yields down, ig down, treasuries down, loans were up. >> we have to leave it there. thank you. come on back. >> i'll see you soon. >> have you been on before? >> it's been a while. >> on this show? >> yeah. >> i must have been out. >> he must have been out. >> was i out? >> you weren't here. >> i wasn't here. i didn't forget you. i would remember you. >> he's fantastic. >> good. do it again. coming up, durable good numbe numbers. and on "squawk box," on monday, your chance to ask a billi billionaire. three hours with warren buffet,

get to ask him your questions and everybody's question. e-mail at askwarren@cnbc.com and the #askwarren. >> pound sign askwarren and we can call it up and find your tweet tweets. >> be sure to watch "squawk box" on monday starting at 6:00 a.m. eastern. your operations? it's not working! yes it is. welcome to tyco integrated security. with world-class monitoring centers and thousands of qualified technicians. we've got a personal passion to help your business run safer, smarter, and sharper. we are tyco integrated security. and we are sharper. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car

here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. (announcer) scottrade knows our and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company." transit fares! as in the 37 billion transit fares we help collect each year.

no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business.

welcome back to "squawk box," everyone. among the stocks we're watching is target, reporting earnings of 1.65, 17 cents higher than the street was expecting. revenue was also slightly higher than expected. as you can see that stock has turned negative after being up much of the morning. right now, down 2.8%, $62.22 was the last tick. and revenue in line with expectations on dollar tree an that stock is still up by 4.3% this morning. when we come back, breaking data on the consumer and durable goods number for january.

and take a look at the u.s. equity futures. [ man ] i've been out there most of my life. you name it...i've hooked it. but there's one... one that's always eluded me. thought i had it in the blizzard of '93. ha! never even came close. sometimes, i actually think it's mocking me. [ engine revs ] what?! quattro!!!!!

♪ [ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ] surprise -- your car needs a new transmission. [ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science. it's just common sense. from td ameritrade.

welcome back to "squawk box." the data is out. durable goods for january are down 5.2%. this is on the order of expectations, maybe a little bit larger drop. let's do the takeawaytakeaways. take away transportation, up 1.9%. look at capital goods on the orders side, non-defense aircraft, capital spending, this number is very strong, 6.3%. that's following down .3, and several sets of revisions. this is a good aspect of a weak durable goods number. transportation made a difference because it turned positive when you pulled it out. headline revisions looked to be 3.7 and looked to be several revisions. we have new home sales,

yesterday's home sales big. i heard you guys this morning. definite advantages what we saw in terms of financing. and home equities, s&ps were more in positive territory. yields,s. >>er, back in the 180s, the low end of a trading range, the real range has been 180 to 2% and back to the low end of it. back to you. >> my computer crashed at the critical moment. what is non-defensible goods ex-aircraft. >> i have never heard of an increase like that. since when? >> i know. shocking. >> more than a year. >> new orders for machinery rose 3.5% the best gain since 2010. >> when i came in this morning and calculated as i do. the three months annualized average of business investment

we're talking about, 21%. somebody help me out. are we having a major rebound in capital goods investment? >> no question. >> this is big. >> durable side, housing, autos, unfortunately at the same time that the government is going the other direction and exports are struggling a little bit. we're operating on a different five cylinders than 12 months ago. >> the private sector is doing better. the consumer is doing a little better and a couple months running businesses are investing more. >> what happened to the lack of confidence from the sequester and uncertainty in washington and all these things we said on cable television in washington. >> part of it is the base is so low. capital spending last year didn't keep up with depreciation. >> now, we're talking about capital spending adding meaningfully to gdp. >> it will be adding yes for the

first time in a while. >> this changes the debate a little bit. maybe a lot. >> the question joe has been harping on whether the government could cut 3% and washington in a tizzy what you cut and economists only care that you cut. if there is off-set in the private sector to a point, right, here's what we want to do. we want to do about 2 1/4, 2 1/2 growth. why do we want to do that? that level brings down unemployment rate. if we get below that the estimates are 750,000 jobs would come from this 3 percentage point decline in government spending. if we can do 2 1/2 because the private sector will step up in growth anyway, i think this 3% will be a net good depending how you do that. am i crazy, dino? >> you're not crazy.

however, we have had three years running in winter cold months private sector improves and fades into spring. we don't know whether seasonal problems. >> it has caused concerns of ceos. >> we had a bunch of -- three years running, you get into april and numbers seem to slow dow down. >> that's why the guidance has been lousy. the ceo of caterpillar said we're not going to get too far out. >> a bunch of bellwethers not send out positive signals. >> they're worried. >> they're worried and not seeing it in the order books. >> even the craziest in the darkest hour admit a dollar of government spending is not as good as a dollar of private sector spending. you'd have to get to the end of the road to get him to admit that. we do know that otherwise we

wouldn't need a private sector. >> on average, we could have the discussion online. >> it would be much better. i don't know what a dollar of government spending is worth. >> anywhere from 1.07 to 1.57. there's different dollars of government spending. a dollar of government spending given to a poor person is likely to be spent and dollar of tax cut to a wealthy person is a little different. a dollar of government spending that -- >> i had no idea you would weigh in on this, rick. >> i'm not going to weigh in. forget it, joe, you will never change his mind. if he was right, europe would be telling us how to fix our economy. >> you know what, rick, that's the kind of dogmatic ideological, what's the wort i'm looking for, monolithic thinking. it's a mix. there's stuff the government does the government needs to do

that's good. >> there's no multiplier effect of government. >> i'm glad you settled the debate raging among economists for years. just like that, a wave of a hand, no multipliers, go for it. 92 there's never been a debate about that. >> really? >> no debate about a multiplier of government spending. >> get art laf fert to debate krugman and get five people to carry away -- >> why would we do that when there's me and you, rick? why would we get krugman to debate laffer when there's krugman v leisman. that's why we have the program we do. >> every now and again you do hit a home run, steve. i have to agree with you on that one. >> that's unfortunately not enough. >> 70 cents on the dollar, you want to get away from that stuff. in the near term, government spending will detract from gdp. over the long term getting more

private sector involved in the economy especially when you have a competition for funds you don't have now, rick. there's lots of excess funding out there, lots of money available to lending and interest rates very low. hard to argue there's a reason to bring down government spending. >> there was a miscalculation. they have their econometric models and plug it in and if we do this we will generate liquidity and they're right but human behavior isn't modelled well and piling up. once again, flawed strategy. >> judge, i can't believe you let him call you a harpy. >> a happy. >> said i was harping on it. i harp. >> you play the harp? >> i'm okay with that. >> let's go to mouth harp. harmoni harmonica. >> do you agree with my call you should randomly cut 3% of your hair. >> you pretended i would have a problem with that and want it

done in a surgical way. >> what about yours? >> that's what i'm talking about. in this economy on the top of my head much less to give than joe's head. >> a flowby cuts it 3% everywhere. >> that's a perfect trim because you have it to give. >> i do. >> we have a little bit of news. before we go to break, take a look at shares of coach right now. you will see it moving up markedly in premarket action close to 4 1/2% right now after an unconfirmed report. let me say it is an unconfirmed report by a trade publication called deal reporter that says the company is exploring a sale. one of the things worth noting, if you were to sell this company at $48.70 or 10% or whatever premium you want, it is still far from that high for the year-over-year, looking at a company trading close to $81 at one point.

unclear to micoach would want to sell itself at this point in the ballgame. crazier things have happened and we will keep our eyes to see what's going on with this and see if we can confirm or report that the report is right or wrong. snoop >> a report over the weekend suggested the stock was bargain. >> that was said before. >> wednesday, baron's, if it had any effect. you look for news. >> the publication says it's exploring a sale of the company. i'd be more inclined to think it's possible private equity players have come to coach looking at it as a bargain and coach is forced to try to figure out what to do about it. we will see and do reporting on this. >> do they make man bags, do you know? >> i do believe they make man bags and they also make coach leather baseballs. you ever seen those? >> yeah, they're pretty cool. yeah.

okay. couldn't get don't get me a man bag, right? >> a leather fanny-pack? >> yeah. no. coming up, new home sales jump 16% in january, the highest level in 4 1/2 years. the chief economist of the national association of home builders says the economy won't pick up momentum this year. david crowe will join us next. hs on their 401(k) to hidden fees. is that what you're looking for, like a hidden fee in your giant mom bag? maybe i have them... oh that's right i don't because i rolled my account over to e-trade where... woah. okay... they don't have hidden fees... hey fern. the junk drawer? why would they... is that my gerbil? you said he moved to a tiny farm. that's it, i'm running away. no, no you can't come! [ male announcer ] e-trade. less for us. more for you.

otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second.

which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ welcome back, everybody.

at this point, futures are flat lining. red arrows these are barely bulging. we'll see what's happening to move investors interest today. we have been watching a lot of retail stocks and another out with quarterly reports. tjx post iing 82 cents a share, roughly in line and a hike in the dividend and 1. 1/2% buy back. guidance is light. looking for 69-63 cents a share. it is slightly lower. the housing market appears to be on the mend but our next guest sifted through the data and says the recent pockets of strength are largely pent-up demand, not a bad thing. why is that a bad thing, david crowe, chief economist of the national association of home builders? >> not a bad thing at all. a good thing we are finally seeing people come out and start

buying houses after three or four years of waiting. >> why does it make it less positive or less relevant or does it? >> it doesn't make it less relative. by saying we're not going to gain momentum this year, i mean that we will continue to grow but you can't quite get that spark going until you solve some of the other problems still out there. one of them being it's very difficult for buyers to get a mortgage. another one is that appraisals are often below the actual asking price. finally, we still do have in some markets competition from foreclosures. >> right. interesting. on the other side, we are seeing there's a lot of investment going into houses at certain places and there's 20, 30 investors lined up for single properties. if you add everything together we're much better off than we were a year ago, but you're saying there's some systemic things that need to be addressed? >> right.

righ right. >> certainly, we're much better than a year ago. we increased about 25%, '11 over '12. and i'm expecting the same percentage increase in '13, continuing to grow but isn't gaining the momentum we usually see in a recovery. we also are starting to face rising prices. some of that investment furor will dissipate as prices continue to rise and those distress properties aren't bargains anymore. >> yeah. what do we do? what do we do about making it's easier for people to get mortgages? what can we tell the appraisers to do? >> the national association of home builders has been working on that. don't use distress sales. there are a sufficient number of arms length consumer to consumer sales, so that they can be used as comparables. use appraisers that know the

local market. follow some of the prescriptions that are in the appraisal guidelines often not used because basically we're looking for cheaper and cheaper provider in that service. >> okay. the fed is -- we've been at zero, qe-3, what do we do to make it's easier for people to get mortgages? >> first of all, we need to clarify what some of the regulations are going to be out of the statute. a few of them have come out but we don't know what all of them are going to be. that leaves mortgage originators in the dark as to exactly what will be considered a safe mortgage, where can they avoid potential lawsuits afterwards. we need to clarify what we're going to do with fannie mae and freddie mac. right now, that's completely unknown. will there be one? will the government participate at all in the mortgage market or leave it to the private market? those things left undetermined

will leave enough uncertainty out there that those willing to lend for mortgages charge a premium, if it's not in the interest rate, it's in the higher thresholds. >> what would your organization do if we decided to end the interest rate mortgage deduction? >> we would fight it to the tooth and nail. >> we haven't -- >> at what rate? >> for everybody or for - for -- there's no level where we could do it? >> no. i think our members right now believe that's not a way to either save tax money or help cure the housing market. >> but a million dollars, $800,000, half a million dollars, there's no number? >> i think there are other ways to address budget deficits without attacking the tax advantages to homeownership. >> everybody thinks there's a different way to do it. it shouldn't be their

constituency that's touched. >> that's right. >> and you think it's not your constituency that should be touched, too. if we're talking about compromise in washington and everybody putting something in, is it a non-starter to say homes or mortgages over half a million dollars shouldn't have the same tax-exempt status. >> there is a counter to every proposal. if you reduced the cap almost all that pain would come from the high cost market so you would hurt the markets in california and along the east coast and virtually no one else. >> you can say that about every tax policy out there. you can twist and turn. is there anywhere you can give or bend anywhere on this? >> that's not what our members tell us, no. >> david, have you studied what happened in canada? >> canada has a lot of different policies, not just that they have no mortgage interest deduction, they don't have nearly the taxation at the local level the u.s. has and they have a process for that being their case a long period of time.

our tax system has allowed this to be in effect since the tax system existed. >> in the uk they faced it out over a period of 10-12 years. noy >> yes, they did and now their first time homeownership age is older than it used to be, harder for younger people to get into homes. >> do you think there are other areas that should be attacked? what about charitable giving? >> we're not ready to bargain with other sectors of the tax system. >> david, thank you. is that another thing the uk does better than us? >> i brought up the uk. >> canada, uk. >> canada seems to have some -- >> i understand not wanting to hurt the house iing market but you want to get to a position you are talking about a massive overhaul of tax effort. >> i asked it because you can imagine what the national association -- you know what it's going to be. that points out how dark- >> there are a lot of

constituencies who would not like to see it -- made purchases like that. if you take massive chunks off the table, you probably won't get to a tax overhaul. >> you could do it 10-20 years. >> or grandfather people already in. >> i'm not talking about raising revenue, i want to cut if you' overhauling the tax code, that's -- >> not raise them and then get rid of them. >> when we come back, we've got retail stocks that are on the move ahead of the opening bell. we'll check in with jim cramer at the new york stock exchange. stick around. tomorrow, budget committee chairman paul ryan returns to "squawk box." we'll ask him about the economy, the fed, and the impact of the automatic sequester cuts. plus, a flood of retailers set to report. "squawk box" starts tomorrow at "squawk box" starts tomorrow at 6:00 a.m. eastern.

streamline th? at fidelity, we do it by merging two tools into one. combining your customized charts with leading-edge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. we like this idea so much that we've applied for a patent. i'm colin beck of fidelity investments. our integrated technical analysis is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

this morning. let's get down to the new york stock exchange. jim cramer joins us now. jim, you can talk target. maybe we should talk a little coach.

i don't know, faber is sitting right next to you. i would like to hear what he has to say about the rumors going around. >> from post 9, this is our first anniversary. so i'm thrilled to be coming to you from there. >> congratulations. >> thank you. coach is one of those stocks that it just seems to go down constantly. it is easily rumored up. people will be able to say it's louis vuitton. this market has been so crazy, i think someone -- i think it's easy to rumor a stock up or down. i don't put too much credence with it. target, those comp sales were so bad versus walmart. dollar tree literally does not disappoint. therefore, it goes higher. operating margins going up. people thought they would be down. it's a very mixed picture this morning. >> what else do you like this morning? >> well, merrill lynch raises google's value. bingo, they say google's a lot more than we thought, because of the multiple expansion. i don't like multiple expansion,

i like real earnings. apple, fren et iks won a big judgment in texas, $3 million plus judgment against apple. i'm watching that because it's a cookie off the radar stock. they also beat microsoft in a similar case. >> jim, real quick, do you care about disney? i don't know if you saw that they said they've got to split iger's job. >> i care about people who make us a lot of money and whose stocks go higher. they should give iger the cfo job and make him treasurer. like apple, they're up 6,000%. i've got 2,000 companies that are down 6,000%. >> take a couple of those, right. jim, thank you. we'll see you in a few minutes. when we come back, our guest hosts this hour will give the last on the fed and the market. [ male announcer ] you are a business pro.

executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and you...rent from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro.

you name it...i've hooked it.